If the mark of an entrepreneur is seeing opportunity where
others don't, then Jan Nytzen and Bjorn Lowenhielm, founders of
Universal Cart Systems Inc. in New York City, are entrepreneurs par
excellence. In the seemingly mundane world of food cart
manufacturing, the pair developed techniques that dramatically
rearranged the economics of the product and provided entree to a
multimillion-dollar opportunity.

Rather than welded steel, Universal's carts, which can be
used for food service as well as merchandising, rely on modular
components made from aluminum extrusions. "What was made by
five workers in five days could now be done by one worker in a few
hours," says Lowenhielm. "[We realized] this was clearly
something that had significant potential."

The funds spent on research and development got Universal into
initial production. With several units occupying New Jersey's
Giant Stadium and with what Lowenhielm calls rave reviews from
food-service contractor Aramark in Philadelphia, the company is now
ready to launch a full-scale rollout of the product.

To do it right, Nytzen and Lowenhielm figure they'll need an
additional $500,000 and eventually as much as $1 million. But with
$1 million already invested, the co-founders are looking for
"angel" investors with the kind of equity capital that
will drive Universal to its next growth level. While they know the
money exists, there is less certainty regarding the kind of angel
investor they need.

David R. Evanson, a writer and consultant, is a principal of
Financial Communications Associates in Ardmore, Pennsylvania. Art
Beroff, a principal of Beroff Associates in Howard Beach, New York,
helps companies raise capital and go public.

Good Chemistry

The importance of the chemistry between entrepreneur and
investor cannot be underestimated. Consider that while a banker may
completely trust and like an entrepreneur, he or she will not
change the lending criteria a single iota because of these
feelings. But with angel investors, the situation is quite
different: If he or she develops a bond with an entrepreneur, an
angel will agree to almost any deal.

Because of this phenomenon, angel investor Rich Bendis, who is
also president of Kansas Technology Enterprise Corp. in Topeka,
Kansas, says entrepreneurs must understand the basic investor
personality types to help them forge the bond so vital to closing
the deal. While private investors come in many different shapes,
they can be categorized into five types: corporate angels,
entrepreneurial angels, enthusiast angels, micromanagement angels
and professional angels.

1. Corporate angels. Typically, corporate angels are
former senior managers of Fortune 1000 corporations who have been
outplaced or have taken early retirement. Corporate angels may say
they're looking for investment opportunities, but in reality,
they're looking for a job. This doesn't mean they won't
invest. Bendis says they typically have about $1 million in cash
and may invest as much as $200,000 in a deal, but some kind of
position, usually unpaid at first, is part of the deal.

Nytzen and Lowenhielm, who had lengthy careers at Volvo and
Electrolux, respectively, before striking out on their own, think a
corporate angel might work out. "I understand their thinking
because we came out of that mold," says Nytzen. "My one
reservation would be that in start-ups, you have to wear a lot of
hats, and people from large corporations with highly specialized
skills can't always do that."

Lowenhielm concurs. If forced to choose a corporate angel who
also wanted a position with the company, he says, "I would
choose someone who left a large corporation to pursue other
interests, as opposed to a senior person who got downsized out of
his or her job."

Corporate angels typically make just one investment, unless
their last one didn't work out, says Bendis. And with respect
to that one investment, they tend to invest everything at once and
may get nervous when the hat gets passed their way again.

2. Entrepreneurial angels. These are the most
prevalent type of angel investors, according to Bendis. Most of
them own and operate highly successful businesses. Because these
investors have another source of income, and perhaps significant
wealth from an initial public offering or partial buyout, they will
take bigger risks and invest more capital than other types of
angels. Whereas the corporate angel is looking for a job,
entrepreneurial angels are looking for synergy with their current
business, a way to diversify their portfolios or, in rarer
instances, a way to prepare for life after their current business
no longer requires their full attention. As a result, these
investors seldom look at businesses outside their area of expertise
and will participate in no more than a handful of investments at
any one time.

"We are talking right now to an investor who owns a
fabrication business," says Lowenhielm. "Obviously, there
are some strong synergies. I like the idea that there is an
incentive for each business to strengthen the other."

According to Bendis, entrepreneurial angels almost always
require a seat on the board of directors but hardly ever want any
kind of management duties. They typically make fair-sized
investments--$200,000 to $500,000--and invest more as the company
progresses. However, because of their agenda, when the synergy or
the potential they initially perceived disappears, oftentimes so do
they.

3. Enthusiast angels. While entrepreneurial angels
tend to be somewhat calculating, enthusiasts simply like to be
involved in deals. Bendis says most enthusiast angels are 65 or
older, independently wealthy from success in a business they
started, and have abbreviated work schedules. For them, investing
is a hobby. They typically want no role in management and rarely
seek board representation.

Because enthusiasts spread themselves across many companies, the
size of their investments tends to be small--from as little as
$10,000 to perhaps a few hundred thousand dollars. "On the
plus side," says Bendis, "enthusiasts tend to have a
difficult time saying no and often bring their friends into a
deal."

Nytzen feels that enthusiast angels, affiliated with the company
but free from the burden of board representation, would provide an
invaluable resource for Universal. "When we created
international advisory boards for Volvo, we were able to attract
top people because there were no official responsibilities,"
Nytzen says. "We received tremendous support and counsel from
them. I see enthusiasts as a very interesting source of
capital."

4. Micromanagement angels. "Micromanagers are
serious investors," says Bendis. "Some of them are born
wealthy, but the vast majority attained wealth through their own
efforts." Unfortunately, this heritage makes them dangerous.
Because they have successfully built a company, micromanagers
attempt to impose the same tactics they used with their own
companies on the companies they're investing in. Though they do
not seek an active management role, micromanagers usually demand a
board seat. If the business is not doing well, they will try to
bring in new managers.

"The idea of control has a little bit of a bad taste [for
us]," says Lowenhielm. "The investor who wants to know
how much we spend on paper clips would be a hindrance. The way I
see it, investors who want to control want to restrain."

"This would be a tough fit for us," agrees Nytzen.
"Right now as a start-up, we [have identified and are
confident of] our market and our products. It would be difficult to
put someone else in the driver's seat."

Bendis says it's possible to exploit the behavior patterns
of micromanagers--but at a cost. "They enjoy having as much
control as possible," Bendis says. "Many will gladly pay
for it by putting more capital in the business." Micromanagers
typically invest between $100,000 and $1 million.

5. Professional angels. The term
"professional" in this context refers to the
investor's occupation, such as doctor, lawyer and, in some rare
instances, accountant. Bendis says professional angels like to
invest in companies that offer a product or service with which they
have some experience: A doctor will look at medical instrumentation
companies, a franchise attorney will look at franchise deals, and
so on.

These investors don't typically need to know what's
going on in the business on a daily basis, and they do not
micromanage their portfolio companies. In fact, professionals
rarely seek board representation. However, Bendis says, they can be
unpleasant to deal with and impatient when the going gets tough,
and may think a company is in trouble before it actually is.

Bendis says professional angels invest in several companies at
one time, and their capital contributions range from $25,000 to
$200,000. "They are good for initial investments but are less
likely to make follow-up investments," he says.

Perhaps more than any other investor, professionals operate
within loosely defined but clear networks, and they tend to be more
comfortable investing alongside their peers. Thus, the first
professional investor you find will likely open a pathway to
others. Professionals can also offer value when they have--and
provide--legal, accounting or financial expertise for which the
company would otherwise have to pay hefty fees. Be wary, however,
because some professionals want to be hired after they invest.

Pairing Up

Of all the different personality types, Nytzen and Lowenhielm
agree the best investor for Universal Cart Systems would be an
entrepreneurial angel. "The fact that he or she is already in
business and wants to remain there and be a resource for our
business seems to create the best atmosphere for success,"
says Nytzen.

But the partners are not ruling out the other types of
investors. "This is business," says Lowenhielm. "If
someone brings something valuable to the table that can help us
reach our goals faster, then I would consider them a good investor
for our business."